Just last week I was on the call with a a techy architect from one of the major-major financial services companies, and he was discussing getting token capacity and his words on third best option was "we'd get it from Coreweave or whoever is still alive". So yeah, I am pretty sure that if that's the sentiment from software people at the major-major financial company, Coreweave is cooked.
<p><pre><code> So yeah, I am pretty sure that if that's the sentiment from software people at the major-major financial company, Coreweave is cooked.
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The ironic thing is, your friend is still trying to get compute, which by all indications is still extremely scarce.
Which is such a wild thing about our industry. These can be simultaneously true<p>- No one has available tokens/gpus/datacenter for sale at any price<p>- No one will lend people money to build it
This is how all capital-intensive utilities operate. The marginal cost of using a little more power or tokens is easy to justify because you can at any point stop using more.<p>But the cost to add more power capacity is huge and highly variable. Just because oil is expensive today doesn’t mean the capex to pump more is justified.<p>Really what AI needs is large customers that will commit to large spend over the next 5-10 years. Without this AI companies are basically offering duration arbitrage of electricity. Not a good place to be; the finances will always look bad.<p>Unfortunately, the amount of capital required by the entire AI industry is enough that counterparty risk is now a concern.
Anthropic and OpenAI are these customers, willing to buy the infrastructure. But they are running out of cash, too.
Wait, Anthropic has $112 billion in cash right now and generates about $70B in revenue per year and grew 10x YoY. If they succeed in raising $100B in cash in the IPO, which I believe they will, they'll have $212B. If their growth declines to 3x (down from 10x) in 2027, they'll still be at $230B in yearly revenue.<p>Further more, their compute commitments are over 10-20 years. Their average quarterly compute commitment is only about $11B - $15B which they have already surpassed with their revenue.<p>At $230b/year, they’d be at around $57b in quarterly revenue against compute of around $16b. This is not bleeding cash.<p>Why do you say they're running out of cash? Can we see your math?
The only reason Anthropic has cash is because VC keep giving them the money. They never had a positive quarter, with revenue always lower than expenses regardless of their growth, thus burning money from VC.<p>If VC money gets tight, they would have to issue debt, that pay interests. With a current negative EBITDA, their bond will be junk at IPO, paying higher interests and having a lot less market than AAA debt (e.g. Google has access to that market). Both things combined translate to "running out of cash".
Small gripe but I don't like 'declines to 3x'. 3x growth would mean repeating this year's record growth twice over, which is smaller relatively but an increase in <i>absolute</i> growth rate.
now do the math with profit instead of revenue<p>most recently (on both a quarterly and annual basis), it was negative
they also have $1T in commitments
Yes, over 10-20 years and I'm guessing many of those contracts are just intents and not hard commitments.<p>Let's say it's 15 years. That's $16B/quarter in commitment. They had $17B in revenue in Q3 2026.<p>If anything, they're far too conservative.
AI doomers have predicted 1095 of the last 0 AI bubble pops.<p>Everyone is using more and more tokens, everyone is complaining that providers lobotomize flag ship models because they don't have the capacity to serve everyone.<p>Then they turn around and compare it to the dark fiber bust or railways or whatever when in each of those the issue was the capacity being build that no one used.<p>It's been 2 years since I could buy a gpu for love or money. It's been one for ram.<p>My old rig is worth ~two~ three[0] times what I paid for it inflation adjusted.<p>[0] fuck me ram is rising again.
If tokens are being given away below cost, of course you're gonna use more. It's not gonna last. How many tokens would you spend on random experiments if they were much more expensive? If tokens are so valuable, why do I (and many others) get to use them on economically worthless things until I'm bored?<p>We just don't know the true value of tokens until those subsidies stop, and the subsidies don't stop because the respective companies don't want to know, at least until everyone cashed out. The valuations of AI companies are very difficult to reconcile with current revenue (which doesn't cover cost) and with a sober mind it's hard to imagine where all this <i>additional</i> revenue is going to come from, down the line. And that's not to say the the technology isn't fundamentally transformative and revolutionary. So was the internet, but it still created an investment bubble.<p>The RAM prices are in yet another pork cycle, which will be exacerbated by the fact that many previous pork cycles left RAM manufacturers with excess capacity and rock-bottom prices, so they're much more careful investing and more assertive negotiating contracts now.
That is precisely what price subsidies look like. These companies are hiding the the true cost of offering these models.
> No one will lend people money to build it<p>The money is there but not at the risk levels these companies have pushed things to. They're spending billions like it's candy, and treating millions like change they found in their couch cushions.<p>Financial systems are usually in the hands of people that have some risk management. When these labs say things like this will change everything, there's no way to know how to evaluate any of this.
Trillions have been lent. What you're saying is like eating 55 burgers, 55 pizzas, 55 tater tots and then complaining that the fridge is empty and nobody will give you more food.
This is a preview of what AI companies will face moving forward trying to raise capital. Menahile the traditional VC path is also drying up with OpenAI struggling with its latest round.<p>It’s going to get very ugly for them as cash starts to run out.
CRWV is about to have an earnings report in less than 20 hours. It's probably best to just shut up for a day, wait for the earnings and then talk after that comes out.
So there’s a chance I can pickup some discounted GPUs next year?
Nop. The hyperscalers will gobble everything available, including any neo cloud that faces financial troubles
Zero chance. Secondary market for enterprise grade GPUs is white hot.
Hyperscalers and SPVs are still planning on accelerating the buildout in 2027. Also even if everything hit the fan tomorrow, it will take time for production to shift back into consumer products if that's even what companies decide to shift to.
I don't the envisioned scenario is that a data centre company fails and Nvidia starts making RTX 5090s for consumers. Rather, one of these companies fails, their stock of enterprise GPUs gets flooded on the market, and suddenly the people/companies buying RTX 5090s for local inference can buy full fat enterprise GPUs, shifting demand.
If by enterprise you mean datacenter (which is what CoreWeave is), the "full fat" cards aren't as plug-and-play in a desktop PC as the consumer cards. They don't typically come with fans, and are meant to be cooled using some kind of holistic whole-rack (or larger) setup. Hobbyists do sometimes buy datacenter GPUs secondhand (and I have considered it, for the price/performance ratio) but it's kind of a lot of work and they tend to run hot.
If a neocloud fails, it makes more sense to recapitalize it and leave the GPUs in place. If you sell the GPUs nobody will have enough power to run them.
GPUs allow you to buy becoming more powerful. They are going to continue to be sought after.
No, the other neoclouds will scoop up the remains. The H100 was released 4 years ago and its still near impossible to find at any discounted price.
If you can out-bid the Chinese.
Aside from the price signal, the fact they were issuing these at a 9.625% coupon rate continues to run up their future debt servicing costs.<p>Coreweave doesnt seem to be in a winner-take-all sector, they have a narrow moat and will have high ongoing capex. I struggle to see how they dont go under eventually even with the ability to restructure debt
CoreWeave is the Exodus Communications of this bubble party.<p>[Sept 2001] <a href="https://www.latimes.com/archives/la-xpm-2001-sep-27-fi-50296-story.html" rel="nofollow">https://www.latimes.com/archives/la-xpm-2001-sep-27-fi-50296...</a><p>"Exodus Communications Inc., which never made a profit since it went public in March 1998, filed for bankruptcy protection after losing customers in the collapsing Internet economy."<p>"Exodus, which runs 44 Internet data centers on four continents, listed $5.98 billion in assets and $4.44 billion in debts in Chapter 11 papers filed Wednesday in U.S. Bankruptcy Court in Delaware. The company operates so-called server farms that provide Web site services for businesses."<p>"The Santa Clara, Calif.-based company’s losses increased more than tenfold in the second quarter, and it fired workers as it failed to win new contracts fast enough to replace those it lost. Exodus counted Yahoo Inc. and AMR Corp.’s American Airlines among its customers."<p>"Trading in Exodus shares was halted before the markets opened Wednesday. The shares fell 33 cents to 17 cents Tuesday and have plunged 99% from a record $89.81 in March 2000."<p>"Analysts say Exodus, with eight different junk bond offerings totaling about $3.4 billion, ran up more debt than it could handle."<p>“We sacrificed profitability in exchange for growth and market share, over-expanding in some areas in advance of demand, not anticipating the decline as the dot-com bubble burst and the economy weakened,” Krause said.<p>"Exodus’ second-quarter loss grew on acquisition and restructuring costs to $583.4 million, or $1.05 a share, from $51.8 million, or 13 cents, a year earlier. Sales rose 79% to $318.7 million but missed analyst estimates. The company lost $256 million on sales of $818.4 million in 2000."
That’s edging up on credit card rates for strong borrowers wild. NerdWallet has Chase Freedom with a lower bound of 18.49% and Citi Diamond Preferred with 16.74%.<p><a href="https://www.nerdwallet.com/credit-cards/best" rel="nofollow">https://www.nerdwallet.com/credit-cards/best</a>
They started at 9.6%. So it was a junk bond when it was issued. Now it's junkier.
Fraudulent circular accounting is so very entertaining.
No Chinese honey traps for the Coreweave CEO for the foreseeable future
It almost reads like a semiconductor process report.
Now let's see Anthropic sell enough of its junk bonds to cover its half a billion in non-cancelable obligations.
totally crazy that Google has bonds yielding 5.68%<p>That's a great return for practically zero risk.<p>(If google defaults on bonds there's much bigger problems in the world than the loss of your capital)
The yield is bounded from below by the treasury yield, which is just a little lower - and with the treasury you have <i>really</i> big problems if they default! But realistically the US will inflate its currency rather than default, so the yield is really just reflecting expected future inflation. It’s not as great a deal as it seems. Bonds are probably the most fairly priced assets in the world.
So much low-risk debt has been issued by the likes of Google, Amazon, etc. that it’s hard for other debt issuers to compete.
I disagree. I think Google Search is in huge trouble. Most of their profits come from it.
US 10y bonds are at 4.871, which is lower but fits your description even better.<p>That being said, inflation is at 3.7% YoY and it's the real rate that maters, not the nominal one.
Google can go under and literally nothing will flinch. I don't think it will cause any trouble on my side, let alone bigger on then loss of capital.
The treasury is having daily rates of 4.56% at 2 year bond and 4.88% at 10 years rate.<p>Yes, Google has a very small risk but still it is a non zero risk that google can bankrupt whereas US govt can physically not bankrupt itself given that it can print the money (there could only be some gridlock within raising the ceiling though but that's true)<p>Also I would argue that Google itself has changed with trillions of dollars spent into AI/Datacenters, it simply can't pivot as well. There is a reason as to why Google is having such high level of interest rate<p>Google isn't stupid and wants to give such high level of interests if not for the amount of risk involved. I dont believe that there's free lunch but also that perhaps this can be a good deal to some and this is gonna push people even more away from the more riskier neoclouds funding and cause their debts to rise in interests rate even more.
Matt Levine once noticed that Microsoft’s bonds were actually cheaper than Treasuries (during a time of Trump-instigated turbulence).<p>His point was that Microsoft has an interest in maximizing its credit worthiness which necessitated the corporate governance etc, while the administration had an interest in maximizing… other stuff (?) which did not necessitate the same things.<p>[1] <a href="https://www.wsj.com/finance/investing/why-microsoft-has-lower-borrowing-costs-than-the-u-s-de841633" rel="nofollow">https://www.wsj.com/finance/investing/why-microsoft-has-lowe...</a>